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Investors’ Behavior in Alternative Asset Classes

Author

Listed:
  • Ellie Papavasiliou

    (Athens University of Economics and Business)

  • Nikolas Topaloglou

    (Athens University of Economics and Business)

  • Georgios Tsomidis

    (Athens University of Economics and Business)

Abstract

We investigate whether alternative asset classes should be included in optimal portfolios of the most prominent investor personae in the Behavioral Finance literature, namely, the Cumulative Prospect Theory, the Markowitz and the Loss Averse types of investors. We develop a stochastic spanning approach for each type of investor. Using the Stochastic Spanning criterion, we construct optimal portfolios with and without alternative assets, namely FX, Commodities, Real Estate and precious metals. Our out of sample comparative performance analysis indicates that investors impression of gains and losses affects significantly the composition and aggregate performance of optimal portfolios and that the alternative asset classes examined are attractive attracted under risk conditions.

Suggested Citation

  • Ellie Papavasiliou & Nikolas Topaloglou & Georgios Tsomidis, 2022. "Investors’ Behavior in Alternative Asset Classes," SPOUDAI Journal of Economics and Business, SPOUDAI Journal of Economics and Business, University of Piraeus, vol. 72(3-4), pages 3-55, July-Dece.
    • Handle: RePEc:spd:journl:v:72:y:2022:i:3-4:p:3-55
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    References listed on IDEAS

    as
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    4. Tversky, Amos & Kahneman, Daniel, 1992. "Advances in Prospect Theory: Cumulative Representation of Uncertainty," Journal of Risk and Uncertainty, Springer, vol. 5(4), pages 297-323, October.
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    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Parametric and Non-parametric tests; Second Order Stochastic Dominance; Stochastic; Spanning; Cumulative Prospect Theory; Loss Aversion; Markowitz Theory; Probability Weighting;
    All these keywords.

    JEL classification:

    • C12 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Hypothesis Testing: General
    • C13 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Estimation: General
    • C15 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Statistical Simulation Methods: General
    • C44 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - Operations Research; Statistical Decision Theory
    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading

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